U.S. trade war with China isn’t winnable, but Trump will likely claim victory anyway

With President Donald Trump announcing a new round of tariffs on China –imposing 10 percent on about $200 billion worth of goods from the country — Beijing said on Tuesday that it would retaliate with a new round of tariffs on U.S. imports. As these tariffs roll on and cause some fear and dread in several industries, it’s worth asking: What does a victory in a trade war with China actually look like? “If they get meaningful concessions out of the Chinese, they will consider this a success,” said Bart Oosterveld, director of the Global Business and Economics Program at the Atlantic Council. What, exactly, is a “meaningful confession,” though? Are there any hard targets included in that definition? Although the aim of these tariffs is to lower the U.S.-China trade deficit — by either $100 billion or $200 billion by the end of 2020 — a “win” can be defined in a number of ways. “Within the administration there are very different views about what a good outcome with China is,” said Oosterveld. Some, he pointed out, such as U.S. trade representative Robert Lighthizer, want to see complete reform, with China becoming a free-market economy. “Then there are others who want concessions on specific trade practices,” said Oosterveld, adding, “You can claim victory pretty quickly in this environment.” So, with some kind of (at least claim to) victory assured, we can expect more of the same in the short term — at least, until the November midterm elections. Along with the announcement of the new tariffs on Monday night, President Trump also said that if China retaliates (which it is). then the U.S. will “immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports” — or pretty much everything the U.S. imports from China. Feeling pretty confident with a strong stock market and high employment figures, Oosterveld said the administration is sure to push ahead with the third round of tariffs. “The administration has no incentive, politically or economically, to back down before the midterms,” said Oosterveld. “This escalation kind of serves them well,” he added. Will these tariffs work to change China’s behavior and help narrow the trade deficit? Well, maybe, said Oosterveld, who sees the Chinese as being “relatively willing” to make some concessions. “But if you’re going to address the trade practices of China, long-term, I think you need to work with allies, like the E.U. and Japan, to apply pressure. I don’t think that’s happening right now,” he said. Indeed, the president seems to view this as a bilateral issue rather than a global one, and his Tuesday morning tweets make more of a nationalistic (or emotional) case for his actions, rather than a pragmatic one pitting China against America’s “great patriots”:

China has openly stated that they are actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me. What China does not understand is that these people are great patriots and fully understand that…..

— Donald J. Trump (@realDonaldTrump) September 18, 2018

…..China has been taking advantage of the United States on Trade for many years. They also know that I am the one that knows how to stop it. There will be great and fast economic retaliation against China if our farmers, ranchers and/or industrial workers are targeted!

— Donald J. Trump (@realDonaldTrump) September 18, 2018

But many U.S. businesses worry that the president’s tariffs will be what puts them in the line of fire: Thousands of companies and trade industries have registered their concerns with Lighthizer’s office, saying that their businesses will take a hit from which they can’t recover. Many have applied to get their products off the tariff list. This, said Oosterveld, seems to be an acceptable price to pay for the Trump administration. “We have very solid economic growth and this, in and of itself, won’t trigger an economic downturn … I’m sure there’s downstream harmful effects to individuals, to certain companies, to certain industries, certainly to companies abroad and certain industries there — I don’t think that’s a major area of concern to this administration right now.”